UK ship-to-ship oil transfer rule change seen having little impact
London (Platts)--21Jan2011/648 am EST/1148 GMT
A proposed change in UK legislation on ship-to-ship transfers of oil
cargoes outside harbor authority areas is unlikely to have much effect on
either the movement of oil or on spot worldscale rates in Northwest Europe,
industry sources say.
After a review of the relevant Merchant Shipping regulations,
parliamentary under-secretary of state for transport Mike Penning announced on
December 6, 2010, that legislation would be drafted to define a single
designated area within UK territorial waters to carry out ship-to-ship
transfers. With a history of hosting ship-to-ship transfers due its sheltered
location on the southeastern coast of the UK, Southwold is scheduled to become
the designated area in April, and a permit system will be established by the
Maritime and Coastguard Agency.
Meanwhile, those port and harbor authorities which already conduct
ship-to-ship transfers will have a two-year period of grace to apply for a
license to enable them to continue hosting STS transfer operations.
In the oil markets, traders dismissed any impact on the trade and flow of
oil in the North Sea.
"Absolutely not, because most [North Sea traders] do Forties ship-to-ship
transfer up in Scapa Flow, where traffic is limited and the weather is good,
except for the wind," a North Sea crude trader said. Forties has the highest
monthly production of the four key North Sea grades of Brent, Forties, Oseberg
Another North Sea source said the introduction of the Southwold as a
designated area was unlikely to change the nature of North Sea STS operations.
However, other traders were more upbeat about the introduction of a designated
area, specifically for STS activity.
"It is a perfect STS shelter place," said a fuel oil trader, adding
Rotterdam, an alternative port for STS activity, was very expensive due to
A shipping broker agreed there would be little initial effect. "I don't
think there will be any short-term effect, [but maybe it] could [eventually]
change rates and routes if they go to Southwold to STS," he said. "But then
again, Skaw is a common STS point in the Baltic, and when Skaw started doing
STS transfers, there was no big change," he added.
OPPOSITION TO THE SOUTHWOLD DECISION REMAINS KEEN
The decision to earmark Southwold as a designated STS transfer location
has enraged local residents, who are strongly opposed to the decision on
environmental and tourism grounds.
"The situation will become worse with the new legislation and there will
be more ships which will increase the risk of a spill," said John Perkins,
secretary of the local Southwold and Reydon Society. "The government's
response has been to close the coastguard station at Great Yarmouth which
would have monitored the transfers. This will now apparently be done from
Southampton," he added.
Local shipping sources admit the number of STS transfers could increase.
"Potentially there could be a lot of business--up to a hundred vessels
[doing STS transfers]," said one.
Other ports around the UK also voiced their concerns. "Maybe those sites
where STS is happening now won't comply with the new regulations," suggested
one harbor master. Sources agreed there could also be a potential threat of
loss of business elsewhere in the UK should STS transfer activity relocate to
The UK Department of Transport defended the decision, saying that a
permit-controlled, designated area would help improve safety and reduce
environmental risk. "It will also be more convenient for shipping companies
[to use a designated area] instead of the costs of coming into a port," said a
Department of Transport spokesman, adding the new regulations would help
manage STS activity more effectively.
But some in the oil industry remained cautious.
"But I don't blame them, I always thought it's too risky what they do off
[Southwold]," said a European fuel oil trader. "Can you imagine...if there was
a spill and it hit the Norfolk coast? Although STS [activity] is relatively
safe these days--it's risk versus reward I guess," he added.
--Rob Sheridan, email@example.com
--Natasha Saini, firstname.lastname@example.org
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